1.1. BACKGROUND OF THE STUDY
Agriculture according to Longman Dictionary of Contemporary English (New Edition) is the science or practice of farming.
Agriculture has a key role to play in the economic development of
Nigeria, it is a leading sector in any meaningful economic development
being carried out by any nation such as ours. Agriculture as its output
tends to contribute significantly in the areas like employment
opportunities, provision of food to the increasing population,
contribution to GDP where the country is able to earn foreign exchange,
also the provision of raw materials to our local industries particularly
the agro-allied industries for further production.
An overview of Nigerian agricultural sector during 1960’s revealed
that agricultural sector was the most important to the economy. In fact,
the generation of this period can still remember those days when the
pyramid of groundnut was the pride to the northern region and cocoa
production areas of the west also boosted the foreign earning from cocoa
exports. Today, the nation is still not independent in terms of
agriculture providing food for its people to feed on.
Credit is an important instrument for improving the welfare of the
poor directly through consumption smoothening that reduces their
vulnerability to short-term income. It also enhances productive capacity
of the poor through financing investment in their human and physical
capital. The demand for credit for productive investments usually comes
from the poor who are less risk-averse and it enables them to overcome
liquidity constraints, making it possible to undertake investments that
can boost production, employment and income. Financial intermediaries
have not been able to accommodate small-scale farmers because it is
risky and a different task associated with high transaction costs. Lack
of information prevented large formal leaders who had capacity to serve
the small-scale farmers and the poor from doing so. It is undisputable
that small-scale farmers have always had a problem of access to credit
facilities. To improve the access, improvements need to be made in the
provision of financial services. In order to implore financial services,
leaders need to consider the preferences and socio-economic condition
of clients. This contributes to both regulatory process as well as
product development – thus, an understanding of characteristics
influencing farmers’ decision to use agricultural credit could assist
policy formulation that could enhance welfare of the poor or those
excluded from access to credit facilities.
The poor performance of Nigerian agriculture and its attendant effect
prompted government to seek and reverse the situation which was
demonstrated in the policies and practice such as National Accelerated
food production programme (NAFPP), Operation Feed the Nation (OFN),
Green Revolution Programme (GRP), Accelerated Crops Production Programme
Scheme (ACPS) and international organisation like the World Bank. This
includes some of the steps taken by the Federal Government of Nigeria to
assist farmers to boost agricultural production in the country.
1.2. STATEMENT OF THE PROBLEM
In spite of the remarkable contribution of the agricultural sector to
the GDP, findings over the years here shown that government subsidies
directed at the agricultural sector have drastically reduced and as such
the dwindling fall in agricultural productivities and by extension
agricultural development. In Nigeria, as in most developing countries,
“lack of credit facilities has been regarded as the major constraint
farmers face when they try to improve economic activities and/or living
conditions” (Britain, 1986: Biswanger et al, 1993: Agbor, 2004). Even
when available, access to credit facilities is difficult to access by
farmers in the rural area despite the fact that it is an essential input
in production (FARM, 2006). This could be adduced to lack of
information and collateral securities among farmers.
Furthermore, the behaviours of financial institutions set up to
finance agriculture revealed that funds necessary to induce agricultural
productivity has not been geared toward agricultural sector. Commercial
banks in particular are skeptical towards financing agricultural
activities and in most cases do not offer friendly interest rate to
encourage farmers to acquire loans. This research study shall examine
the analysis of credit facilities to small scale farmers in Nigeria.
1.3. OBJECTIVES OF THE STUDY
The specific objectives of the analysis of credit facilities to small scale farmers are:
- To analyze the impact of credit facilities to the operation of small scale farmers in Nigeria.
- To identify and analyze the socio-economic characteristics that may
influence farmer’s decision about whether or not to use credit.
- To examine the probability that non-borrowers can borrow given that socio-economic characteristics are increased.
1.4. RESEARCH QUESTIONS
- what is the impact of credit facilities to the operation of small scale farmers in Nigeria?
- what are the socio-economic characteristics that may influence farmer’s decision about whether or not to use credit?
- what is the probability that non-borrowers can borrow given that socio-economic characteristics are increased.
1.5. STATEMENT OF HYPOTHESIS
Given the nature of this research work there is need to formulate a reasonable hypothesis:
H0: credit facilities are not significant in the operation of small scale farmers in Nigeria.
H1: Credit facilities are significant in the operation of small scale farmers in Nigeria.
1.6. SCOPE OF THE STUDY
The scope of this study shall cover the role of credit facilities to
small scale farmers in Ohaofia L.G.A in Abia state. This study shall
encompass the nature, the structure of availability of each facility as
well as measurement of relative accessibility to small scale farmers in
1.7. JUSTIFICATION OF STUDY
The concern of credit facilities as a factor input has been amplified
by different experts and government itself has the potentials of
opening new doors of opportunities in the development of small-scale
farming in Nigeria.
There are few studies on the subject of small scale farm credit and
how their socio-economic characteristics influence their decision about
whether or not to take credit. The development of the sector is not
feasible if an avenue of credit facilities is not provided. Therefore,
this research work is directed at providing insight into this less
studied dimension in agriculture by eliciting and analyzing small scale
farmers’ socio-economic factors that affect their decision about credit
facilities, and also to evaluate the nature, structure and pattern of
credit facilities to small scale farmers in Nigeria.
1.8. ORGANISATION OF STUDY
This study is divided into five chapters. Chapter one contains the
introduction of the study, chapter two deals with the review of relevant
literature and theoretical framework, while chapter three presents the
research methodology which embodies specification of estimating
techniques. Chapter four reveals the presentation and discussion of
results and findings, while summary of findings, conclusion and
recommendation are provided in chapter five.